Under the new 23rd March 2020 licensing reforms, a Class 1 & Class 2 may carry out all functions in their area of practice. However, only the nominated Licensee in Charge may authorise the withdrawal of money from a trust account. Depending on your business structure, it may necessary for the Principal Licensee to appoint additional Class 1 license holder for each area of the business.

It is the Principal Licensee’s responsibility to

a) ensure no part of the business is left unsupervised

b) that there is no more than one LIC for the same part of the business.

Certificate of Registration Holders (now Assistant Agents) and Licensed staff members (now Class 2) are no longer allowed, under any circumstances to approve payments.

The reason for this change? An increase in trust account fraud in NSW and the total number of claims to the compensation fund over the 2016 – 2019 period.

After the legislation changes, Principal Licensees have suddenly found themselves in a new position. They are now approving trust account payments which they may have previously delegated to their Property Managers or other internal staff.

Depending on staff qualifications and structure of your business, it may be necessary to appoint an external Class 1 license holder. This person will approve trust account payments on behalf of the agency in place of the Principal licensee, who may not be able to personally perform this function.

Appointing a Class 1 Holder

Appointing a Class 1 holder of the trust account does not mean they become the Licensee of the agency. It simply means that they are in charge of the supervision of the trust account.

You can appoint internally if staff have the correct level of license. Or it may be beneficial for the Licensee to outsource this function. This will ensure the process is completed correctly and to the required standard under the legislation. Better yet, that there are no breaches received for non-compliance.

Appointment of Class 1 License Holders Best Practice Tips:

  • Appoint someone with the correct qualification – must be Class 1
  • Appoint someone with the correct skill level to operate the trust account
  • Verify qualification on the NSW public register
  • Seek copies of insurance
  • Document structure in Operational Procedures
  • Complete a formal appointment of Class 1 internally (previously known as Section 31)
  • Keep all records pertaining to the trust account for a period of 3 years

For more information see the new Supervision Guidelines.

Alternatively, get in contact with our team of Angels and see how we can assist.

Jane Morgan is the Director of End of Month Angels, a consultancy firm specialising in Trust Accounting. Jane knows the legislative requirements of running a successful Real Estate office through her 23 years industry experience. Don’t trust just anyone with your trust accounting. Book an appointment with an End of Month Angel today.